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Riding the Mortgage Roller Coaster

The last 18 months in the mortgage market has been every bit as turbulent as the rest of the economy as mortgage lenders have navigated their way through the global pandemic, trying to second guess what will happen with lending rates as well as with house prices. Alongside regular restrictions and policy changes owing to COVID, lenders have also had the effects of Brexit to contend with, so although the constantly changing goalposts from lenders have provided me with plenty of challenges as a mortgage broker, they do have my sympathy for what they have had to contend with.

To offer a short introduction, I set up Pargin Financial Solutions in 2017 after working as a mortgage broker for around 5 years prior within a large corporate estate agency. It was here that I initially formed good relationships with local estate agents, and wanted to take the knowledge and experience that I had gained into the independent local agents when the time was right for me to do so. Having been in the corporate world for this long, and having worked directly for lenders for another 5 years prior to this, there were a lot working practices that I have taken from these roles into my own business, but the big driver in setting this up was having my own ideas and opinions on ways of working. At the start of 2021, I was joined by a personal friend and former colleague of mine, which has been great and incorporating a second advisor into the business has been made a lot easier for us this year by a busy housing market.

Initially however as the pandemic struck, like many others we didn’t see this as presenting an opportunity for us ahead! When the first lockdown was implemented, the entire economy ground to a halt and that of course meant that I could not trade also. As with anyone that was self-employed, it became quite a scary time for me personally, and although I have always been set up to work from home if needed, my clients were not able to leave their homes to view properties, and valuers were unable to go out in order to assess properties. The market was effectively closed, and I found my role change overnight. Instead of looking to help to save clients’ money, overcome certain criteria or just to make lives easier by arranging mortgages for their purchases and remortgages, I had become a point of contact for my clients that were facing harder times and had become genuinely concerned about their financial circumstances. Unfortunately, some of my clients did lose jobs, or were unable to go out to work where they were self-employed, and a lot were placed on furlough meaning that their income was temporarily reduced.

The great thing that did come in very early was the opportunity for mortgage borrowers to apply for payment holidays from their lenders without this having an impact on their credit score. The process in applying for this was made quite easy with most lenders who set up systems quickly to enable their borrowers to log on and request a payment holiday online. Once approved, they could then have a few months without needing to make their mortgage payments, the interest of which would then be spread across their remaining mortgage term once repayments started again. I feel that this halted a lot of panic, and was quite refreshing to see in such a time of uncertainty. Although support for current borrowers was good to see in the early stages of the pandemic, new purchasers were somewhat neglected as mortgage schemes were removed en mass. It was clear that the effects of COVID were unknown, and in my opinion as lenders struggled to forecast what would happen to house prices in an environment where there was a potential of future mass unemployment, they really tightened the purse strings, removing any borrowing with a higher element of risk, which meant withdrawals of all schemes across the higher loan to values. My big consideration here was for clients that already had a mortgage that was due to come off of its fixed rate over the next few months, where again options were limited, but we did have some available to us as brokers in order to assist in this circumstance.

After the initial period of lockdown, the first market to reopen was thankfully the housing market. It did seem a bit strange that viewing houses came back quicker than a lot of things, but I must say in my position it was nice that some of my clients were able to get out there again and start looking at their options to move. It was a while until the lenders followed suit and enabled borrowing at higher loan to values again, bringing these back very slowly which made it tough for clients that were looking to get on with moving. The government did reduce the Bank of England base rate to 0.1%, which helped and is the lowest that this has ever been in the banks 325-year history. Doing so enabled mortgage rates to remain low, and slowly but surely lenders began to gain confidence and release products at higher loan to values once more. Although it already seems a while ago, I remember one big lender coming to market with a restricted number of products at 90% loan to value before other large lenders were willing to do so. The result was an abundance of brokers logging onto the lenders application system first thing in the morning in order to try to secure products for their clients in a situation not too dissimilar to a scramble for tickets for a gig or festival on the day of release. It was quite bizarre, but something that was hugely important to communicate to my applicants in order to get across the challenges that we both would face if they were looking at purchasing during this time. As brokers, we just couldn’t be assured of products being available for clients, so it was a period that wasn’t without its challenges.

As the government started to lift restrictions, they had also brought in a couple of big policy changes which contributed to a frantic time in the housing market for us all. Furlough was of course assisting many of the population that couldn’t go out to work, and on top of this a stamp duty holiday was implemented. This meant that the housing market took off in a big way as people saw the potential to save thousands of pounds in stamp duty liability by moving during this time. Working in East Anglia, I also saw lifestyle changes adding a silent third intensifier to our local market. I had a lot of contact from people looking to move out of London and the surrounding areas as they perhaps saw the requirement of a daily commute as a thing of the past. Our area saw a wave of demand as a result, and I definitely know of buyers that felt it was the right time to look for properties that were a bit larger, perhaps with outside space that were that bit further from their normal workplace. I also feel that during lockdown some people started to despise the four walls that they had been forced to spend so much time in, and just felt that now was the time for a change. As demand began to soar, house prices began to increase as well. Furlough was well supported initially by the lenders, and I was working flat out at this time trying to assist all of my current clients looking to move as well as new clients looking for properties. Although it was tough going, personally I was both pleased and very relieved to see the return of the housing market.

As time went on, first time buyers that were finding the new market tough also received some support in the way of higher loan to value products returning. Again Government-led, 95% loan to value schemes which had been withdrawn for the best part of a year before returning were re-introduced, so a lot of first-time buyers that had this deposit amount accumulated found that they were now in a position to start to look for properties again, which was a welcome relief to many. Gradually, we did start to see support for furloughed workers fade away from lenders, with many insisting on clients having returned to work before they would enable them to borrow. The self-
employed and company directors have also seen big changes, with lenders taking opposing views on those that have been in receipt of grants as well as looking at recent trading in ways that we had not
seen prior to COVID. My advice for anyone that has been impacted, or continues to be impacted by the last 18months is to speak to an adviser early, as certain aspects are likely to impact the self-employed at least until the start of the tax year in 2022 and possibly beyond as income is accounted for annually in this sector.

After a bit of a roller-coaster ride during the last year and a half, the mortgage market seems to have settled, and although policy changes still exist, I feel that a lot of people now anticipate that things are different and understand where additional documentation is requested or additional questions are being asked. It will be interesting to see what policy changes are brought in during the next year, and how the demand for housing changes. Although it has been a hugely demanding time to be a small business owner, and to work in a field that has seen so many changes like a lot of other industries out there, I’m very grateful for the way that the market has reacted and know that I have been very lucky to have been supported by some fantastic agents and of course by some fantastic clients both in using my services and also recommending me to their friends and families. I’d like to take the opportunity to thank all of you out there for that and for enabling me to continue doing what I enjoy.

Top tips for the self-employed at this time when it comes to mortgages:

  1. Gain your latest 2 years Tax Calculations and Tax Year Overviews from your accountant or online.
  2. Also ask your accountant for your accounts if a Ltd company director, as the net profit figure and salary can be looked at by some lenders rather than the salary and dividends figures.
  3. Provide your adviser with your recent business bank statements to display your current trading levels
  4. Be sure to advise whether you have been in receipt of any grants during COVID, and find out when and how much was received
  5. Plan early and gain advice as there have been a lot of changes following the pandemic

Your property may be repossessed if you do not keep up repayments on your mortgage.

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